A 130% surge in memory semiconductor prices has sent shockwaves through global PC and smartphone markets. Rising costs for key components including DRAM and solid-state drives (SSDs) are forcing device price increases, prompting consumers to hold off on purchases.
The budget device segment is rapidly shrinking, with grim forecasts suggesting that mass adoption of artificial intelligence (AI) devices will be delayed.
Global market research firm Gartner projected on the 27th that worldwide PC shipments will plunge 10.4% year-over-year this year. Smartphone shipments are also expected to decline 8.4%.
Soaring component prices are the main culprit behind this market freeze. Gartner forecasts combined DRAM and SSD prices will rise 130% by year-end. These elevated component costs will translate directly into higher consumer prices, with PC prices expected to jump 17% and smartphone prices 13%.
As device prices spike, consumers have entered a "wait-and-see" mode, opting to repair existing devices rather than upgrade to expensive new models. Average usage periods for enterprise PCs are projected to extend by 15% and personal PCs by 20% through year-end.
Manufacturers face mounting pressure as well. Memory's share of PC manufacturing costs is projected to climb from 16% last year to 23% this year. Budget product lines with thin margins now face potential elimination from the market.
Gartner predicts the sub-$500 budget PC market will disappear entirely by 2028. The budget smartphone segment is similarly precarious, with budget device buyers leaving the market five times faster than premium buyers.
The nascent AI PC market has also hit a roadblock. Price resistance has pushed back the timeline for 50% AI PC penetration to 2028, later than initially expected.
"The first half of this year will be a watershed moment determining whether manufacturers succeed in price optimization and margin protection," said Ranjit Atwal, Senior Director Analyst at Gartner.
Industry observers expect device makers to prioritize profitability over volume rather than aggressively cutting prices to stimulate demand.